Question

When jewelry stores ask you to put on the product, or car dealers refer to the prospective vehicle you are considering as "your car", what is this an example of ? Choose the BEST answer.

The Endowment Effect

Time Inconsistency/Myopia

Mental Accounting

Framing Effects

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Question 23.125 pts

Prospect Theory says that you...

Feel the same about losses and gains

Cannot say anything, because prospect theory does not cover this topic

Suffer from losses more than you enjoy equivalent gains

Enjoy gains more than you suffer from equivalent  losses

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Question 33.125 pts

Which of the following is NOT an example of a nudge

Telling a customer that they must buy this health product if they want to lose 30 pounds and be healthier

placing the healthy food snacks towards the front of the store where they are most visible

marking the buttons you don't want users to select (although they technically can) in a grey color

labelling the trash can as recycle and landfill

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Question 43.125 pts

What kind of market structure is being used by the majority of companies in the mall

Monopolistic Competition

Monopoly

Pure Competition

Oligopoly What is true of ALL Firms? They make pricing decisions by setting MR=MC They have positive profits in the short run They have higher costs in the long run than in the short run The engage in advertising to differentiate themselves from others Flag this Question Question 73.125 pts If Price=$10 when Q=10, VC=$95, TC=$120, then what will the firm do? It will produce in the short run, but in the long run it may exit if nothing substantively changes It will produce in both the long and the short run even if nothing in the industry or market changes It will produce in the long run, but in the short run it will not produce It will not produce in the short run and in the long run it will exit the industry

Answer 1

1. Answer is a) endowment effect : In psychology and behavioral economics, the endowment effect is the hypothesis that people ascribe more value to things merely because they own them.

2. Option d) Prospect theory assumes that losses and gains are valued differently, and thus individuals make decisions based on perceived gains instead of perceived losses. Also known as "loss-aversion" theory, the general concept is that if two choices are put before an individual, both equal, with one presented in terms of potential gains and the other in terms of possible losses, the former option will be chosen.

3. Option a) because Nudge is a concept in behavioral science, political theory and behavioral economics which proposes positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals.

4. Option d) because according to Prof. Baumol, “under oligopoly, advertising can become a life-and-death matter where a firm which fails to keep up with the advertising budget of its competitors may find its customers drifting off to rival products.”